The National Capital Region has enjoyed a sustained economic turnaround since the recession ended in 2009.  The Conference Board of Canada believes that we should achieve growth of 3.7% for 2010, our highest level in a decade.

The RGA is the region’s key mobilizing force. 

With more than 600 members in all sectors of activity from both sides of the river, we play a critical role in the region’s economy.  Our task is to generate greater commercial prosperity throughout the community by representing the business community’s interests and supporting activities in French.

The RGA constantly strives to support the National Capital Region’s extraordinary quality of life by rallying economic players of all sizes.

Painting the economic picture is surely an as much an art as it is a science – even in periods of economic stability.  The challenge is multiplied in periods of volatility, like the one we’re going through now.  The so-called experts provide their perspectives on markets, jobs, currency, real estate, consumers, GDP, and all other economic indicators. Each brings their forecasts and solutions that go from massive state intervention to not interfering with market forces.  And their offer advice … The truth is that no-one (or almost no-one) was able to predict the financial crisis that is rocking our economy since September 2008.

On May 7 2009, the TSX closed above 10,000 – where it stood six months ago.  Canada created 35,000 jobs in April, according to Statistics Canada.  Based on observing our prudent fiscal policies and sound management of financial institutions, the IMF says that Canada is in a better position than other industrialised countries to weather the storm. Many commentators are already talking about recovery, while others are less optimistic.  How do we connect of all these statements and figures to the realities of everyday business?  Should we now start reading the horoscope instead of the business pages?

In fact, the impact of the current economic turmoil on businesses is a function of a number of factors including sector of activity, financial health, and management skills.  Anecdotal RGA information reveals that the vast majority of its 600 members are impacted by the downturn.  Members are reporting layoffs and difficulty in financing new projects. 

However, there are a number of businesses that are doing rather well in this economic climate.  Their success is closely linked to consumer behaviour which changes radically from times of stability to times of turmoil.  Example: if you’re in the car business, you will now be in a better position in repairs than in new car sales. Same for the food industry – the high-end restaurant may be more vulnerable than the grocer.  And again for housing – demand for repairs remains strong while new house sales have slowed down from an overheated market. The consumer retrenches in terms of financial engagements – seeing uncertainty for the future.  It’s another vision of time.  If the economic climate inspires confidence, the consumer behaves with a longer term perspective and does not hesitate to acquire goods and services that can be amortized over time.  Conversely, the vision shortens as perceived possibilities of payment for the future are reduced.

Another factor – the amortization of capital assets.  Typically, a young business will have larger operating costs that become amortized over time.  Established businesses are more likely to be further ahead in this regard, with lower operating costs.  This can mean the difference between profits and losses.

At the end, the organisation with the ability to retain competent staff, to plan and manage finances and inputs, to continue developing business, and to keep the focus on the objective will have a greater chance of getting through the storm.

Moral of the story – in business we control a good portion of the elements of our success.  Other elements are somewhat more elusive.  The idea is to play our best elements smartly – including luck when it passes by.

Two hours of commuting to work from Orleans or Kanata; people unable to do their shopping without public transit; no place to park anywhere downtown – the timing of the transit strike is providing many of the regular inconveniences plus the added bonus of having it in bad weather and around the Holiday Season – and union officials may be looking at this as really good pressure tactics.  And who knows… it might work – at least in the short term. 

We are all feeling the pinch whether we use the system or not; and it all takes the form of a reduction in the quality of our lives. 

While everyone is paying one way or another, certain segments of the population are paying an even greater price for this action.  Until this strike is resolved, many business people are taking a direct hit with lower customer traffic and, of course, fewer sales.  Again, the timing could not be better for the union – an economic downturn compounded with a transit strike.  And while the strike will end at one point, business people, notably retail people, will continue to pay for a long time.  For many, this is the busiest time of the year.  This is the time that makes the difference between black and red at the end of the year.  Recovering from this blow will take much longer than the duration of hostilities between OC Transpo and the union – and will cost infinitely more.

So will the tactics work in the longer term?  At this time, it would take a crackerjack public relations guru to create sympathy for people with job security and competitive wages – and who are refusing an actual pay increase while thousands are losing their jobs in basically all economic sectors.  If goodwill is worth anything to unions, then they’re not accumulating any capital right now.  But of course, if it’s not worth anything, at least they end up with a few bucks to show for their trouble.

Happy Holidays!

Joanne Lefebvre, RGA

This may be the only question left to ask after seeing some of the pillars of the banking industry disappear, recent corporate results that can only be described as dismal, savings evaporating – plus markets that are not reacting well to the innumerable rescue packages devised by central banks and governments.

 This slide has been eroding not only pocket books – but also confidence. So people are well justified to ask “Are we there yet?”

 Many analysts maintain that Canada is uniquely positioned to whether this storm better that any other G-8 country – an economy largely based on resources and energy, a sound fiscal situation resulting from prudent management of public funds including no budget deficits over the past 15 years and payment of almost a third of our national debt.  These are elements that will certainly play in our favour - but as the crisis deepens south of the border, some sectors in Canada are being directly affected – and the ripple effect cannot yet be quantified.

For the moment, some of the key indicators, such as employment and construction starts, are showing good resilience. But other sectors are showing definite signs of fragility.  Commodity prices have been falling and third quarter results for a number of large Canadian corporations leave little room for optimisim.

Is this a recession?  This is a rhetorical question – and one that doesn’t really tell us about the future.   So what will be the signs that we have reached “the” bottom?  We should look at the same signs that have brought us the gloom and doom – stability in the American real estate market and greater solvency of financial institutions. 

So, back to the question.  Central banks and governments continue to pump billions into the system to “restore credit”, and real estate continues to lose value.  Following this logic, the answer is no.

And the road back could be a long one.

Joanne Lefebvre, RGA

Note: any comment or announcement posted will be validated by the RGA team before being published.

For more than 25 years, the RGA has been involved in promoting bilingualism in the business community. With a number of partners, including the City of Ottawa and Canadian Heritage, we are key participants in the Business Assistance Program, which supports businesses that want to improve their client services in both French and English.

We invite you to visit the Business Assistance Program website at http://www.business-assistance.ca/home.html. See for yourself what the program has to offer you and your business.

Joanne Lefebvre, RGA